6

1. (1)

   [deleted]6

2. (1A)

   Subject to the exceptions in (3) to (8), this chapter applies to a firm with Part 4A permission to carry on any of the following activities:6

   1. (a)

      insurance distribution activity8;6

   2. (b)

      home finance mediation activity; and6

   3. (c)

      MCD article 3(1)(b) credit intermediation activity.6

3. (2)

   [deleted]6

   1515
4. (3)

   In6 relation to insurance distribution activity8, this chapter does not apply to a firm if another authorised person which has net tangible assets of more than £10 million provides a comparable guarantee; for this purpose:

   1. (a)

      if the firm is a member of a group in which there is an authorised person with net tangible assets of more than £10 million, the comparable guarantee must be from that person;

   2. (b)

      A 'comparable guarantee' means a written agreement on terms at least equal to those in a contract of professional indemnity insurance (see MIPRU 3.2.4 R) to finance the claims that might arise as a result of a breach by the firm of its duties under the regulatory system or civil law.

5. (4)

   In6 relation to home finance mediation activity,1 this chapter does not apply to:

   15
   1. (a)

      any firm which is an MCD mortgage credit intermediary exclusively advising on or arranging second charge regulated mortgage contracts (except for MIPRU 3.2.9A R);5

      5
   2. (b)

      a firm that is subject to MIPRU 3.2.9R;7 if:

      55
      1. (i)

         it has net tangible assets of more than £1 million; or

      2. (ii)

         the comparable guarantee provisions of (3) apply (as if the firm was carrying on insurance mediation activity) but substituting £1 million for £10 million in (3)(a) and (b); or6

   3. (c)

      a firm which carries on home finance mediation activity exclusively for legacy CCA mortgage contracts;6

6. (5)

   This chapter does not apply to:

   1. (a)

      an insurer; or

   2. (b)

      a managing agent; or

   3. (c)

      a firm to which IPRU(INV) 13.1.5R(1)4(Financial resource requirements for personal investment firms: requirement to hold professional indemnity insurance) applies; or3

      34
   4. (d)

      an exempt CAD firm to which IPRU(INV) 9.2.5R (Initial capital and professional indemnity insurance requirements - exempt CAD firms that are also IDD8 insurance intermediaries) applies.3

7. (6)

   In6 relation to home finance mediation activityor MCD article 3(1)(b) credit intermediation activity,5 this chapter does not apply to an authorised professional firmwhich is not an MCD credit intermediary:5

   11
   1. (a)

      that is required by another rule to hold professional indemnity insurance (see IPRU(INV) 2.3.1R); and

   2. (b)

      whosehome finance mediation activity,1 is incidental to its main business.

      1
8. (7)

   In6 relation to home finance mediation activity or MCD article 3(1)(b) credit intermediation activity, this chapter does not apply to an MCD credit intermediary if it holds a comparable guarantee (as specified in (4)(b)(ii)) against liability arising from professional negligence.11

[Note: article 29(2) of the MCD]11

1. (8)

   In6 relation to MCD article 3(1)(b) credit intermediation activity, only MIPRU 3.2.9A R applies.11

[Note: article 29(2)(a) of the MCD]11

A firm must take out and maintain professional indemnity insurance that is at least equal to the requirements of this section from:

1. (1)

   an insurance undertaking authorised to transact professional indemnity insurance in the UK7; or

2. (2)

   a person of equivalent status in:

   1. (i)

      a Zone A country; or

   2. (ii)

      the Channel Islands, Gibraltar, Bermuda or the Isle of Man.

The contract of professional indemnity insurance must incorporate terms which make provision for:

1. (1)

   cover in respect of claims for which a firm may be liable as a result of the conduct of itself, its employees and its appointed representatives (acting within the scope of their appointment);

2. (2)

   the minimum limits of indemnity per year set out in this section;

3. (3)

   an excess as set out in this section;

4. (4)

   appropriate cover in respect of legal defence costs;

5. (5)

   continuous cover in respect of claims arising from work carried out from the date on which the firm was given Part 4A permission for the insurance distribution activity6 or home finance mediation activity1 concerned; and

   1
6. (6)

   cover in respect of Ombudsman awards made against the firm.

If the firm is an insurance intermediary, then the minimum limits of indemnity per year6

are:

1. (1)

   for a single claim, €1,250,0006; and

   33
2. (2)

   in aggregate, the higher of:6

   33
   1. (a)

      €1,850,000; and6

   2. (b)

      an amount equivalent to 10% of annual income (this amount being subject to a maximum of £30 million).6

If a policy is denominated in any currency other than euros, a firm must take reasonable steps to ensure that the limits of indemnity are, when the policy is effected and at renewal, at least equivalent to those required.

If the firm is a home finance intermediary that is not subject to MIPRU 3.2.9A R, then the minimum limit of indemnity is the higher of 10% of annual income up to £1 million, and:

1. (1)

   for a single claim, £100,000; or

2. (2)

   in aggregate, £500,000.

4If the firm is:

1. (1)

   an MCD article 3(1)(b) credit intermediary who is not also an MCD article 3(1)(b) creditor carrying out direct sales only5; or

2. (2)

   a home finance intermediary that is:5

   1. (a)

      an MCD mortgage adviser; or

   2. (b)

      an MCD mortgage arranger,5

   who is not also an MCD mortgage lender carrying out direct sales only;

then the minimum limit of indemnity is that specified in MIPRU 3.2.9BR8.

7The minimum monetary amount of the professional indemnity insurance or comparable guarantee is7:

1. (1)

   EUR 460 000 for each individual claim;

2. (2)

   in aggregate EUR 750 000 per calendar year for all claims.

In this chapter, "client assets" includes a document only if it has value, or is capable of having value, in itself (such as a bearer instrument).

For a firm which does not hold client money or other client assets, the excess must not be more than the higher of:

1. (1)

   £2,500; and

2. (2)

   1.5% of annual income.

For a firm which holds client money or other client assets, the excess must not be more than the higher of:

1. (1)

   £5,000; and

2. (2)

   3% of annual income.

If a policy provides cover to more than one firm, then:

1. (1)

   the limits of indemnity must be calculated on the combined annual income of all the firms named in the policy; and

2. (2)

   each firm named in the policy must have the benefit of the relevant minimum limits of indemnity.

The rule on the items which are eligible to contribute to the capital resources of a firm applies (see MIPRU 4.4.2 R.